T-bills are paying more and more
It’s been approximately six months since i wrote my article on T-bills. Since then T-bills rates have went up considerably.
The six month T-bill was yielding 3.22%. Today the T-bill is yielding 5.08%. That is a whopping 58% increase!
I am still purchasing short-term T-bills as my old ones mature.
Here are the current T-bill rates:
| Length | Rate |
| 1 month | 4.56% |
| 6 month | 5.08% |
| 1 year | 5.087% |
| 2 year | 4.683% |
As you can see, the six month and one year T-bills are over 5% now.
Let’s look at how much on a percentage basis, each has went up YTD and within the last month.
| One month Increase | YTD | |
| 1 month | 7.15% | 55% |
| 6 month | 24.7% | 41.5% |
| 1 year | 36% | 35% |
| 2 year | 48% | 26% |
Looking at the data, it appears that long-term rates are increasing at a higher rote over the last month. On the other hand, the shorter-term rates increased a lot more since the beginning of the year.
If we want the yield curve to come out of inversion, we need the long-term rates to increase more and the short-term rates to fall. So, the higher rates we are seeing in the 2 year and further over the last month is actually a good thing.
What does this mean for me?
For me, I am not ready to step out on the yield curve and purchase Treasuries longer than a year. I am keeping my purchases in the 3 month to 6 month maturity dates. I’m certainly not telling you to do this. However, for me, I believe the stock market will eventually present some good buying opportunities, so I want the cash available if the opportunity rises. Also, it seems that the long-term rates aren’t done increasing, so I think I can get better rates for longer-term Treasuries in the near future.
Before the end of the year, there is a good chance I will remove a portion of my I-bonds as well. I think inflation will be here for awhile; however, I question whether ibonds will remain a good place for me to park my cash if T-bill keep increasing.
On a random side note-As of today I am back to 10% cash. I sold off some of my winners like Traveler’s Insurance, some of my Fedex shares that were up 20%, and even a small portion of my Uber that had ran up 35%. For me, I just want to conserve some gains and capital. I won’t stay on the sidelines with it for long.
Wishing you the best on your investment journey!
